Climate Change:

Sen. Pete Domenici (R-N.M.) wants to hold hearings next month about a climate change plan authored by Sen. Jeff Bingaman (D-N.M.), top Democrat on the Senate Energy and Natural Resources Committee. Will Domenici come out in support of Bingaman's plan? Will Sen. James Inhofe (R-Okla.) assert jurisdiction over climate policy? How does Bingaman's proposal differ from other carbon dioxide reduction efforts in Congress? Jason Grumet, executive director of the National Commission on Energy Policy, and Jonathan Black, legislative assistant to Bingaman, describe the senator's plan to reduce greenhouse gas emissions.

Transcript

Darren Samuelsohn: Welcome to OnPoint. I'm Darren Samuelsohn. Joining us today in the E&ETV studios in Washington is Jonathan Black, legislative aide to Senator Jeff Bingaman, Democrat from New Mexico, and Jason Grumet, from the National Commission on Energy Policy. Gentlemen thanks for being here.

Jonathan Black: Thank you Darren.

Jason Grumet: Thanks Darren.

Darren Samuelsohn: Busy couple of weeks on Capitol Hill in terms of global warming and you two were both right in the middle of the action. Give us a sense, first off Jonathan, what happened and why did it happen?

Jonathan Black: Well this was a huge week. Senator Bingaman had a great success. He said many times that the Senate took a stand now and basically went on the record to say that global warming is real and that mandatory limits on emissions are going to be required to deal with the problem.

Darren Samuelsohn: OK. Jason?

Jason Grumet: Well I think, as Jonathan said, when we look back a few years from now I think we're going to see the debate and the Senate resolution is really the tipping point in this discussion. I think for a long time people have pointed to the Byrd-Hagel resolution as the kind of U.S. rationale for disengagement. Well I don't think that was really a fair reading of that resolution. I think what we now see is 53 U.S. senators saying that the science is clear and it's time for the U.S. to engage.

Darren Samuelsohn: Let's back up for a second, the Byrd-Hagel resolution passed in 1997, 95 to zero and what did it say?

Jason Grumet: What the Byrd-Hagel resolution said was that the president should not engage in an international dialogue. This was done actually prior to Kyoto, although it's been redescribed as kind of a rejection of the Kyoto Treaty. But prior to Kyoto the Senate said quite forcefully that the president should not engage in international negotiations based on the premise that such actions would undermine the U.S. economy and that we should not engage until we had commitments from the rest of the world, because this of course is a global problem. What happened two days ago is the U.S. Senate allowed that policy to evolve. We're still committed to making sure the climate policy does not undermine the economy. We're still committed to making sure that the U.S. acts in a way that will bring the full globe into the solution, but rather than these seeming like implacable obstacles the Senate has now said these are challenges. And I think with some pride I would say that based on the energy commission's report there is a view that these are challenges that can be met. And I think most significant, in my view, is the agreement between Chairman Domenici and Senator Bingaman to now move directly into serious legislative hearings to put that package together.

Darren Samuelsohn: Let's get a little bit closer into what happened between Senator Bingaman and Senator Domenici. I mean a couple of weeks ago when we were talking we were thinking about possibly a legislative debate on Capitol Hill. Now you're talking about a resolution that passed and it's a nonbinding resolution, but what happened? Why did we become, talking about a resolution and why did that come up on the Senate floor as opposed to legislation, Jon?

Jonathan Black: Well, what I think what Senator Domenici basically said down on the floor was things were moving a little bit too quickly for him.

Darren Samuelsohn: Right.

Jonathan Black: And he wanted to step back and look at the proposal. The proposal obviously has merits, enough merits to warrant that he wanted to investigate it further and now he's going on the record saying that he wants to hold hearings on this proposal.

Darren Samuelsohn: Do you think that had he supported the bill, if it had come up for a vote, that you probably would have gained passage of it at the time?

Jonathan Black: I don't really want to speculate about that, but let's hope that --

Darren Samuelsohn: A lot of people were guessing though that certainly if Domenici came along that this was going to be a big --

Jason Grumet: I think Senator Domenici is one of the key people in this town who is going to have to be part of the solution. I think that had, I personally believe, that had Senator Domenici cosponsored the legislation it would have passed, but I think in fairness, Senator Domenici recognized that deciding you want to do something and minting, in detail, the solution is a two-step process.

Darren Samuelsohn: Right.

Jason Grumet: The notion that we could break through this intractable opposition and in one graceful moment also mint the solution I think was probably an unrealistic one.

Darren Samuelsohn: Yeah.

Jason Grumet: For now 10 years the Senate has been working this issue with baseball bats.

Darren Samuelsohn: Right.

Jason Grumet: And now we're picking up pencils. I think we've made the transition from whether we're going to address climate change to how we're going to address climate change.

Darren Samuelsohn: I haven't really thought of Senator Bingaman, personally, as the person who's been the global warming senator on the Democratic side. Can you give me any sense of why Senator Bingaman ultimately grabbed a hold of the National Commission on Energy Policy recommendations?

Jonathan Black: Yeah, absolutely. Well obviously Senator Bingaman said for a long time that climate policy and energy policy are interrelated, so he's had an eye on this issue for many years. Following the McCain-Lieberman debate I think what we had was a record of 43 senators who were on record saying they want to pass some sort of mandatory legislation. You had a broad swath of other folks who said they want to be there, but they did not have -- they weren't feeling right with the mechanics and Senator Bingaman was interested in finding out what were those folks saying? So we explored all the options, McCain-Lieberman was back, Senator Hagel had some voluntary approach along with the president and the energy commission came up, they addressed this broad swath of the middle and Senator Bingaman said I think that this is a workable solution.

Darren Samuelsohn: And how did the two of you guys and Senator Bingaman and the National Commission on Energy Policy, why did you two come together?

Jason Grumet: Well you may be aware that when we put out this report we did try to make sure that people were aware of this. I mean this was a three-year effort, funded by primarily the William and Flora Hewlett Foundation to bring together a kind of disorientingly bipartisan group. Our view and hope was that we would tap into the tremendous energy in our political system for a solution to this problem. I think it is absolutely appropriate to recognize that we didn't create this energy, OK? This energy was created by hundreds of scientists, by environmental groups, by none other than Joe Lieberman and John McCain, who for four years have been pushing this issue with tremendous passion and clarity, by our nation's governors, by Schwarzenegger, Pataki, by Romney, by the G8, by the science. I mean there was a tremendous number with a desire to do something and what we hoped to do was to put something on the table that navigated the shoals. That dealt with the hysteria and the debate. That capped the costs so that we didn't have this…my expert versus your expert problem and I think when we laid that out Senator Bingaman was the first person to basically say, you know, I think that makes some good sense, but don't just trust my capable staff.

Darren Samuelsohn: Right.

Jason Grumet: And he did something very important, which was he asked EIA to analyze these recommendations and when the EIA came back and said, yes, contrary to the assertions of the administration, you can have a mandatory economy-wide program that does not have the negative economic impacts that everybody claimed. I think that's when Senator Bingaman knew he had something and it was from there that we really moved forward.

Jonathan Black: Absolutely, it's so important to remember this is not Senator Bingaman's proposal. This is a bipartisan proposal and it's something that really attracted him and obviously has attracted a lot of folks like Chairman Domenici.

Darren Samuelsohn: We saw language that was discussed last week and it circulated amongst lobbyists, it was circulated amongst the media all. Are we going to see it come out now as the bill here pretty soon?

Jonathan Black: I don't think that we've really reached a decision on that yet, on how to precede forward. We're going to have these hearings now, probably on the proposal, maybe on legislation, but we haven't really made a determination.

Darren Samuelsohn: Do you have any sense on the hearings? I mean are we going to be seeing the full on treatment on hearings? Are we going to see people from industry, from the environmental community and --

Jonathan Black: Well that's our hope. I mean, there's been a lot of disinformation that's been spreading around, and I think that from the left and from the right people's reaction was, what is this? We don't want to take it seriously and basically they didn't have enough time to take it seriously and look at it so we'd like to hear from them.

Darren Samuelsohn: Well, moving forward on hearings, I mean clearly there's going to be a question. We've reported about it. Senator Inhofe will claim jurisdiction over global warming legislation. He's said so much in statements and Senator Voinovich as well was saying, you know, we're going to have to talk to Senator Domenici about this. So clearly, you're on the Democratic side, but it looks like we're going to have some sort of jurisdictional turf war. I mean do you want to move something, mark something up in the Energy and Natural Resources Committee?

Jonathan Black: Well yeah and we're not really sure about that, but I don't really remember Chairman Inhofe complaining when Senator Hagel's three bills got referred to the energy committee, to the Foreign Relations Committee, to the Finance Committee. Those are all global warming proposals.

Darren Samuelsohn: Sure.

Jonathan Black: So I mean, obviously we've struck a frequency here, but --

Jason Grumet: What's really just, I think, to me, both delightful and a little ironic is --

Darren Samuelsohn: Sure.

Jason Grumet: There's plenty of greenhouse gas emissions out there. I think that the notion that we've gone from people debating whether the problem exists to now the relevant committees of relevant jurisdiction arguing over who gets the credit for fixing the problem. You know, that's a fight that I'd like to see happen.

Darren Samuelsohn: But if it goes to the Environment and Public Works Committee is going underneath somebody who doesn't believe that climate change is happening.

Jason Grumet: And again, I think people see the insincerity of that demand.

Darren Samuelsohn: Right.

Jason Grumet: I mean Jeff Bingaman and Pete Domenici have shown over the last month that they care about getting things done.

Darren Samuelsohn: Yeah.

Jason Grumet: They took on some of the toughest challenges they proposed a bipartisan approach, I think it's going to have ample support to the Senate. It will hopefully become by far the basis of the final conference package. I am absolutely sure that those two senators are anxious to engage the other relevant committees that wanted to do something.

Jonathan Black: Absolutely. I think Senator Bingaman was down the floor saying, you know, this is an EPW, this is an energy idea, this is a commerce -- global warming spans all committees.

Jason Grumet: But yeah, I mean, look, Senator Inhofe has very strong and obviously heartfelt opinions, but he's clearly in the minority and I do not believe that the U.S. Senate is going to allow him to take the global challenge of climate change and stick it under his mattress and sleep on it for four years.

Darren Samuelsohn: Now let's talk about some of the specifics, about the commission policy, and I guess the one thing that Senator Domenici kind of held up as his reservation was the credit system, the way that these allocations would be divided up. Now this has been out there since December, so you've had a --

Jason Grumet: Well this is a very important point. The commission report does not propose a specific solution for where in the food chain of energy, from the coal mine down to the socket is the right point to regulation. We also chose not to propose a specific allocation scheme. We think that everybody recognizes that that is so fundamentally a political decision about how you carve up goodies.

Darren Samuelsohn: But this was in the bill though, that ultimately got discussed and compared --

Jason Grumet: So what happened over last three to four weeks when people said, you know, folks there's actually a kind of historic opportunity to move legislation, was a very aggressive effort that we, as the commission, tried to support by saying there's different options. You can go upstream, midstream, downstream. You can allocate through an auction. We tried, as did many others, to support Senator Bingaman and other's questions about how to do this, and I think what we found was things don't usually move this fast in Washington.

Darren Samuelsohn: Right.

Jason Grumet: It was very difficult to get the very key companies that have to play here to engage because they still weren't sure whether they were just saying no. So you kind of get a lowest common denominator reality with the trade associations when things are really moving fast. I think my great hope is that what happens at these hearings is that the trade associations can hold onto their memos and sit on the bench for a little while. We can have the companies come forward and really express now that they see that this is not going away. We broke through and now the question's how do we get it done? So now we need people to come in and really engage and these are, they're complicated questions, they're not insolvable. I mean Senator Domenici's staff had 72 hours to try to wrap around an issue of national significance that others have been working on for months and years. So it's pretty understandable to me that they wanted to step back and have a little moment to reflect.

Darren Samuelsohn: Jon, in the negotiations that went on in the last couple of weeks, how much tug and pull was there with Senator Domenici's staff in terms of them trying to change things and you wanting to keep things the way they are?

Jonathan Black: There really wasn't a lot of that. I think what Senator Domenici was grappling with was the political decision of is this the right time for me to say that I want to be onboard with something like this? And then for him to try and wrap his mind around how the mechanics were working, I think he just wanted to take a step back and take it all in.

Darren Samuelsohn: And the proposal that you did offer put the credits, I guess, at the beginning of the supply chain, right? How does that --

Jason Grumet: The big challenge we have in this town is that there's one stellar example of success when it comes to cap-and-trade and that's the acid rain program.

Darren Samuelsohn: Right.

Jason Grumet: And everyone has the acid rain program launched so happily and deeply in their brains that everyone assumes that's the starting point. Climate change is really a fundamentally different challenge. The story of the acid rain decision to grandfather 95 percent of the credits to the regulated entities is a story of putting the allocations where you place the costs. It's not a story of saying give them upstream no matter what. It made sense in the acid rain program because the coal burning utilities basically had to eat the cost of compliance. The natural gas industry was in a competitive fight for market share and the coal guys couldn't pass those costs through. It made sense to give it to them. What we talked about was basically embracing that same principle of placing the allocations where the incidence of the cost was. So look at the refining industry.

Darren Samuelsohn: Right.

Jason Grumet: They're going to pass 98 percent of these costs down to the consumers, which of course is the goal. The goal in a climate change program is to change behavior by setting the markets and go all the way through. If they're passing the costs all the way down it would be an absurd charade to give them 100 percent of the allocation. It would be a $15 billion windfall to the refining industry, while they're out there with baseball bats opposing the program. So people need some time to step back and think through the differences between the acid rain program and an economy wide climate program. I think when you do that you realize that you want to regulate at the choke points. You want to regulate at the places where administratively are the easiest, but if the coal mines are going to pass the cost down to coal burning utilities some of the allocations should go to the coal burning utilities.

Darren Samuelsohn: Would we see the same shifting away from coal to natural gas from this idea?

Jason Grumet: No, and I think, and this is a very hard concept for people to grapple with, but where you place the allocation is not really going to have much impact on that. I mean EIA had analyzed our approach. We didn't have an allocation formula. What they determined was that coal would grow somewhat slower than it would absent the policy, that natural gas demand would increase by a shocking 0.6/10 of 1 percent.

Darren Samuelsohn: Right.

Jason Grumet: That's going to be the answer regardless of whether you have an auction, regardless of whether you give them all away to the coal guys, regardless of whether you hand them out on the streets. That will be the impact of the program. So the challenge is really to come up with a fair and straightforward and transparent way of giving everybody their fair share, including the consumer.

Jonathan Black: I think what you're seeing here is kind of a preview of the discussion that we hope to have in the committees.

Darren Samuelsohn: Sure.

Jonathan Black: And I think that's one of the biggest successes of this week, is that we're going to move forward and we are going to have a rational thoughtful discussion in committee about how do we allocate, where do we allocate and how do we cut down --

Darren Samuelsohn: One of the other questions that came up as the proposal came out and went forward was the idea of the safety valve.

Jonathan Black: Yeah.

Darren Samuelsohn: This idea of trying to cap the carbon costs and seven dollars per ton, question about that, I mean in Europe right now carbon trading at $20 a ton. I mean doesn't that, if you went ahead with seven dollar carbon ton caps, create some sort of market inequity? And the United States is sort of way behind its European counterpart.

Jason Grumet: Every mighty oak tree starts with an acorn. It is true that the European system has credits trading now at about $25 a ton U.S. It's also true that they don't really have an economy-wide program. They've just focused really on the large stationary sources, and it's most true that at the present in the U.S. carbon is trading at zero dollars a ton. And I think the issue is how do we move the United States of America, by far the largest economy, the greatest technological economy and the greatest emitters of greenhouse gases, back into this global discussion. There's nothing magic about $7 or $6 or $8. It does reflect the kind of midpoints of the kind of economic world about the actual kind of damages from CO2 are and these are very inexact estimates. But the magic of the safety valve is that for a long time we've been having this, you know, my experts say it's cheap and easy. My experts say it will wreck the economy and what the safety valve does is it just kind of jujitsu that argument. So now if you believe that technology is going to function quickly and that this is going to be cheap and easy, the safety valve will have no impact and the benefits of the commission proposal will be almost the same as McCain-Lieberman.

Darren Samuelsohn: Yeah. Jon?

Jonathan Black: I think really the most important thing about this is just getting started and what they're doing is taking out the question of cost. There are two questions, it was how much is this going to cost the economy and how are we going to engage the developing world? I think what the commission's proposal has done nicely is taken those arguments out of it.

Darren Samuelsohn: Stepping back, big picture, the debate primarily on global warming, at least legislatively, has been Senators McCain, Lieberman. They're the ones who pushed this bill forward a couple of years ago, got a vote and then they again brought another vote up here. Does your proposal take away from McCain and Lieberman? I'm just kind of trying to put this into a bigger picture context. I mean are you stealing the thunder away from Senators McCain and Lieberman?

Jason Grumet: You know, if anyone ever figured out how to steal John McCain's thunder they could get it in the -- I think without question, Senators McCain and Lieberman have been and will continue to be two of the primary actors on this issue. There are a hundred members of the U.S. Senate. I think that we are starting to now see the notion that we need to bring some greater certainty to this debate to address and comfort the anxieties of people who just aren't there yet. Among the community of believers, I think Senators McCain and Lieberman have brought forth a very thoughtful and appropriate proposal. What they have not been able to do is to address the hysteria factor. People saying, you know, Dick Darmon said in 1990, this is the Bet Your Economy the program and sadly, that idea has continued despite the dramatic difference between what we proposed and Kyoto. You still hear people cranking out their kind of Kyoto rhetoric. That's never going to stop. The only way to stop that is by saying, look, we can't tell you exactly how much pollution this will reduce, but it will not cost more than 2 percent increase in electricity prices, 6 cents a gallon gasoline. It will not have a greater impact on coal than… the ability to just flip that debate is I think is one of the fundamental challenges.

Jason Grumet: I think that was unfortunate. I think Senator McCain made the point appropriately that he was criticizing the environmental community for their kind of refusal to compromise and move forward --

Darren Samuelsohn: On the nuclear stuff, on his bill --

Jason Grumet: Right. So I thought it was a little ironic that while kind of criticizing one community for their failure to make modifications in their way of thinking, that he would see fit to criticize someone else because they had a slightly different approach. But he cares very deeply about this and I think, I expect and hope that Senators McCain and Lieberman and Warner and DeWine and the whole group of people who came together, I mean this was a resolution cosponsored by Domenici, Bingaman --

Darren Samuelsohn: Sure, 12 Republicans.

Jason Grumet: Twelve Republicans and John McCain. So I think we really have a moment to now close together.

Darren Samuelsohn: Jon, there was an original draft of the proposal and it had a deadline on there that said Congress needed to act by the end of this year, I'm sorry, the end of the first year --

Jonathan Black: The end of first session.

Darren Samuelsohn: Why was that taken out and I mean --

Jonathan Black: Well it just gave us a little bit more comfort with some Republicans saying that we weren't going to rush into this. This is precisely what Domenici wanted, to step back and say let's have some hearings and think about it. Don't give us a deadline of the end of 2005.

Darren Samuelsohn: OK.

Jonathan Black: And that was certainly something we can accept.

Darren Samuelsohn: Gentlemen it doesn't sound like global warming is going away anytime soon. Thank you very much for being here.

Jonathan Black: My pleasure.

Jason Grumet: Thank you.

Darren Samuelsohn: Until next time, this is Darren Samuelsohn for another edition of OnPoint.